Arkansas Blog

Tax break for frackers will cost state employees a raise, Beebe says

The Beebe administration is sticking by its guns. It says the legislature's override of his veto of a $5 million tax break for sand used in fracking for gas will cost state employees a 1 percent pay raise.

State Department of Finance and Administration Director Richard Weiss said the COLA is “going away.”

“We have some of our revenue at risk, and that’s the place to make a reduction,” he said.

Weiss was asked if he saw a possibility for an upward revision of the forecast.

“As of right now we don’t see that,” he said. “We don’t see changing the forecast upwards at all based on what we’re looking at. I guess you never say never on anything, but that is certainly not the plan going forward.”

Sen. Jonathan Dismang, who engineered the tax cut despite a prohibition on considering non-fiscal measures in the fiscal session without a two-thirds vote, thinks the governor is just budgeting conservatively and there's play in state revenues to take care of state employees. But the Beebe administration notes that a failure to appeal a lower court ruling on the tax exemption Dismang wants to give for sand pumped down wells could produce liability for $36 million in past taxes collected.

A 1 percent pay raise for state constitutional officers and judges was in a separate bill. That money comes off the top. Lawmakers left themselves out this year.

Gas drillers pay lower severance, sales and property taxes in Arkansas than in, say, Texas while pumping, in the most recent year, more than $3 billion worth of gas out of the ground. But at least one legislator who argued for the override of Beebe's veto that the tax discouraged job creation and contributed to a decline in drilling in the state. Most experts believe drilling is a function of gas prices, which have dropped because of increased production.